The Behavioral and Experimental Economics group has an influential position in this field in the Netherlands and Europe. CREED, the Amsterdam-based group, focuses particularly on three main projects: economics of political decision making; bounded rationality and institutions and experimental economics. The research of the Rotterdam-based group focuses on two broad themes: decision under risk and uncertainty and intertemporal choice.
Bounded rationality models of expectation formation and learning are becoming a serious alternative to rational expectations, which has been the dominating paradigm until quite recently. The fully rational representative agent is replaced by a large heterogeneous population of boundedly rational interacting agents, who form expectations based upon time series observations and update their forecasting rules according to new observations and new information about market fundamentals. Conditions under which learning converges to rational expectations or to a boundedly rational expectations equilibrium with excess volatility are investigated. Formation of expectations is studied in theory, in laboratory experiments with human subjects and in real markets. Applications include finance and macroeconomics.